Houston Housing Market Finishes Record Year With Record Month by Todd Sullivan, ValuePlays

There has been plenty of chatter out there regarding oil and the Houston housing market and those fears have hit the price of Howard Hughes.  I’ve been on record stating that unless we are seeing $40 oil in December of 2015 and beyond (a scenario I find unlikely), the current fall in oil prices will present nothing more than a marginal impact in Houston’s market.  Early results back that:

Houston Real Estate Milestones in December

  • 2014 was a record year for the Houston real estate market, with December marking the greatest one-month gain in sales volume (11.6 percent);
  • Single-family home sales increased 11.6 percent year-over-year;
  • Total property sales rose 11.0 percent to 7,695;
  • Total dollar volume jumped 18.1 percent, increasing from $1.8 billion to $2.0 billion on a year-over-year basis;
  • At $280,863, the single-family home average price reached the highest level for a December in Houston;
  • At $209,590, the single-family home median price also reached a December high;
  • A 2.5-months supply of inventory of single-family homes is the lowest level of all time and is well below the national average of 5.1 months;
  • Sales of townhouses/condominiums rose 7.3 percent year-over-year;
  • Single-family home rentals rose 11.7 percent compared to December 2013 while rentals of townhouses/condominiums climbed 11.5 percent.

As oil prices slide from October through December (~40%) the Houston market surged to its best month on record.  Here is the key metric, inventory. Houston’s supply of new single family homes is 2.5mos which is 1/2 the national level and also an all time low for the city. Employment in the area is also surging and will continue to grow no matter what oil prices do. The city is also so very affordable, with a median home price of $209k, it is the most affordable large city for housing in the US. THAT matters ……. alot.  That will keep a steady stream of young professionals to the area and as that happens, the city’s dependence on oil/gas falls and creates more demand for housing. this is backed by the double digit growth in rentals, there simply are not enough homes for sale…

Skeptics will say that December is too early to tell given the fall in oil prices but let’s be honest. Everyone in Houston knows what happens when oil prices fall, some folks lose their jobs.  Anyone who was even remotely on the layoff bubble was not going out and buying a home in December, nope, the people buying were folks not connected with energy or those far enough up the chain they weren’t worried.

Further, estimates have total energy related job losses in 2015 (assuming oil prices stay low) at 9,000 to 28,000.  Those sound like big numbers until one realizes there are nearly 3,000,000 (actually 2,955,900) people employed in the Houston area….the high estimate of 28k would lower employment .009%….. Not really the stuff housing crashes are made of….

Even the most pessimistic forecasts call for the city to add a net 50k jobs in 2015 (range is 50k to 100k) and that number, when coupled with a housing shortage, means the Houston housing market at worst treads water and more likely continues to grow, albeit at a slower pace.

Howard Hughes’s Woodlands MPC is essentially sold out for residential development and they will add 1,000 single family homes in Bridgland (half of them are already sold). So to believe oil will seriously disrupt Howard Hughes’s MPC’s the math works out like this:  A Houston area that sees a little over 6,000 homes sales per month somehow can’t support just over 500 total sales from Howard Hughes in all of 2015…..  Let’s go all draconian and say home sales drop 50% in 2015 to 35,000. Again in order for you to believe HHC will be severely affected by all this you have to believe that the two most desirable MPC’s in the Houston area can’t sell 1.7% of that lower number next year……again, not likely.  Go for an 80% drop in home sales and HHC needs to sell a whopping 4% of that total…

CoreLogic on it 

Economy at a Glance Jan 2015 from the Houston Business Partnership

More here and here

So, what is the most realistic scenario? The Houston economy continues to grow, the population continues to grow, employment continues to grow and because of all that, and a serious housing shortage, demand for housing continues to grow. Now, all of these will happen at a slower pace than the record pace set in 2015, that is ok and actually a good thing. But let’s not pretend HHC can’t sell 500 or 600 more homes in 2015…..it just isn’t based in reality…..

More details:

HOUSTON (January 14, 2015) The year 2014 enters the history books as a year of extremes for the Houston housing market, as home sales volume and prices achieved record highs while inventory levels tumbled to record lows.

The frenzied real estate activity was primarily driven by the addition of more than 125,000 jobs that attracted buyers and renters from across the U.S. and around the world between November 2013 and November 2014, according to the Texas Workforce Commission.

December single-family home sales increased 11.6 percent versus December 2013 while total property sales rose 11.0 percent. The latest monthly report prepared by the Houston Association of Realtors (HAR) shows that contracts closed on 6,451 single-family homes, shrinking inventory to a 2.5-months supply, the lowest level of all time. Once again, homes from $250,000 and above registered the highest sales volume and accounted for the latest round of price appreciation.

“The Houston housing market experienced its best year on record in 2014 and that is a reflection of the vitality of the local economy,” said HAR Chair Nancy Furst with Berkshire Hathaway HomeServices Anderson Properties. “We expect the pace of sales to normalize this year, which should finally enable inventory levels to grow, restoring balance to the market.”

The single-family home average price rose 6.6 percent year-over-year to $280,863 while the median price—the figure at which half of the homes sold for more and half sold for less—rose 11.2 percent to $209,590. Both figures represent historic highs for a December in Houston, however they did not top the all-time record prices (average of $284,569 and median of $215,000) reached in June 2014.

December sales of all property types in Houston totaled 7,695, an 11.0 percent increase over the same month last year. Total dollar volume for properties sold in December soared 18.1 percent to $2.0 billion versus $1.8 billion a year earlier.

2014 Annual Market Comparison

2014 was a record year for the Houston housing market, with strong gains recorded in sales volume and pricing versus 2013. There were 75,319 single-family closings and 91,202 total closings, representing the most transactions in the history of Houston real estate. Months inventory began the year at a 2.6-months supply, and while it crept up to a 3.0-months supply over the summer, it ended the year at a record low 2.5-months supply. Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity.

The greatest one-month sales volume of 2014 was recorded in July, with 7,613 single-family closings. By contrast, the lightest one-month sales volume took place in January, with 3,930 closings. The biggest year-over-year sales jump took place in December.

Single-family home sales rose 2.8 percent for the year and sales of all property types increased 3.5 percent. On a year-to-date basis, the average price climbed 8.7 percent to $270,182 while the median price increased 10.6 percent to $199,000. Total dollar volume for full-year 2014 reached a record high, up 12.7 percent to nearly $24 billion compared to around $21 billion in full-year 2013.

CATEGORIES FULL-YEAR 2013 FULL-YEAR 2014 CHANGE
Single-family home sales 73,266 75,319 2.8%
Total property sales 88,080 91,202 3.5%
Total dollar volume $20,891,392,084 $23,553,542,859 12.7%
Single-family average sales price $248,591 $270,182 8.7%
Single-family median sales price $180,000 $199,000 10.6%

* Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity. This figure is representative of the single-family homes market.

December Monthly Market Comparison

December delivered positive results across all sales categories compared to December 2013. On a year-over-year basis, total property sales, total dollar volume and average and median pricing all rose.

Month-end pending sales for all property types totaled 3,414. That is up 9.4 percent compared to last year and suggests another possible increase when the January sales numbers are crunched. Active listings, or the number of available properties, at the end of December declined 8.3 percent from December 2013 to 25,821.

Housing inventory in Houston has been below a four-month supply since November 2012. It first fell below a three-month supply in November 2013, and reached a record low 2.5-months supply in December 2014. Inventory consisting of a 6.0-month supply is typically regarded as constituting a balanced real estate market. For perspective, the national inventory of single-family homes is 5.1 months of supply, according to the National Association of Realtors (NAR).

CATEGORIES DECEMBER 2013 DECEMBER 2014 CHANGE
Total property sales 6,932 7,695 11.0%
Total dollar volume $1,750,080,206 $2,066,438,709 18.1%
Total active listings 28,147 25,821 -8.3%
Total pending sales 3,122 3,414 9.4%
Single-family home sales 5,781 6,451 11.6%
Single-family average sales price $263,403 $280,863 6.6%
Single-family median sales price $188,500 $209,590 11.2%
Single-family months inventory* 2.6 2.5 -6.2%

* Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity. This figure is representative of the single-family homes market.

Single-Family Homes Update

Houston Housing Market

December sales of single-family homes in Houston totaled 6,451, up 11.6 percent from December 2013. Broken out by housing segment, December sales performed as follows:

  • $1 – $79,999: decreased 19.8 percent
  • $80,000 – $149,999: decreased 8.1 percent
  • $150,000 – $249,999: increased 19.4 percent
  • $250,000 – $499,999: increased 26.1 percent
  • $500,000 – $1 million and above: increased 20.4 percent

Houston Housing Market

The average price of a single-family home rose 6.6 percent from last year to $280,863, the highest level ever for a December in Houston. At $209,590, the median sales price for single-family homes also achieved an historic high for December, up 11.2 percent year-over-year.

HAR also breaks out the sales performance of existing single-family homes throughout the Houston market. In December 2014, existing home sales totaled 5,384, a 13.4 percent increase from the same month last year. The average sales price rose 2.7 percent year-over-year to $253,108. The median sales price shot up 11.8 percent to $190,000.

Townhouse/Condominium Update

December sales of townhouses and condominiums rose 7.3 percent from one year earlier. A total of 556 units sold last month versus 518 properties in December 2013. The average price increased 10.1 percent to $231,561 while the median price rose 1.8 percent to $158,000. Months supply of inventory fell to 2.3 months compared to 2.6 months in December 2013.

Houston Housing Market

Lease Property Update

December demand for lease properties was strong. Rentals of single-family homes jumped 11.7 percent compared to December 2013, while year-over-year townhouse/condominium rentals increased 11.5 percent. The average rent among single-family lease homes rose 5.0 percent to $1,699. The December average rent for a townhouse/condominium rose 2.4 percent to $1,507 per month.